The example comes from the world of private operation of public parks, the business my company is in. We keep parks open by operating much less expensively than can the government, usually using only the fees paid by park users without any additional tax dollars.

Last year, Barack Obama issued an order raising the minimum wage of Federal contractors to $10.10 an hour. Though concessionaires like us are normally thought of legally as tenants of the government rather than contractors, the Department of Labor wrote the rules in such a way that this wage order would apply to concessionaires that operate Federal parks, such as those in the US Forest Service's campground concession program.

As a result of this order and similar minimum wage increases by the State of California, a concessionaire (not our company) that ran campgrounds in the Tahoe National Forest in California informed the Forest Service that it would need to raise camping rates to offset these minimum wage increases. As an aside, wages and benefits that are tied to wage rates (e.g. workers comp and payroll taxes) make up about 50% of a private concessionaire's costs. So if minimum wages go up, say, 20%, then (given the very low margins in the business) a 10% price increase is necessary just to stay even.

The Tahoe NF rejected the fee increase request, despite the fact that the concessionaire turned over its books to show that it was losing money at the higher minimum wage rates.

So what did the Tahoe NF do? It took over operation of the campgrounds itself, ending a successful 30-year partnership with private operators. How did it solve the minimum wage issue? Simple! Minimum wage laws don't apply to the Federal government. So it will use dozens of volunteers who are paid nothing to operate the campground.

In other words, at a time when the President believes it is a burning priority to make sure every campground worker makes at least $10.10 an hour, the US Forest Service is firing private, paid workers and replacing them with volunteers.

By the way, even using volunteers, the US Forest Service will STILL be paying more to operate the campgrounds than it did with the concessionaire. Under the private partnership, the private operator paid all expenses and paid the US Forest Service a concession fee, essentially rent. The campground's operation and maintenance were paid for entirely with user fees, and the USFS actually made money from the operation. Now, even with volunteers, the USFS operating plan shows it using $2 million of taxpayer money over the next five years in addition to user fees to keep the parks open.

Update: Despite the original (stated) reason for taking over the campground, and despite using dozens of unpaid laborers, the USFS still had to raise customer rates in the end -- higher than the original private concessionaire proposed!

5 Comments

ErikEssig:

Matthew Slyfield:

princessnyman:

Diana Furchtgott-Roth and Jared Meyer have an article in the Federalist discussing the hypocrisy of members of Congress who advocate for higher minimum wages while paying their interns nothing.

I think the hypocrisy isn't that they don't pay their interns minimum wage. The hypocrisy is that they aren't sponsoring legislation to force all of congress to pay their interns minimum wage. This is similar to the liberal argument that libertarians are hypocrites because they take govt money in its various forms when that isn't hypocritical at all, it is the reality of the environment we live in. In fact, it would be hypocritical if they didn't take the money since they already believe it to be theirs.

As for your example, it certainly displays the dangers of bureaucracies.